tax liberty tax jtx holdings december 2012 corporate presentation slide deck ppt pdf powerpoint
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JTH Holding, Inc.
Investor Day 2012
JTH HOLDING, INC.
Safe Harbor Statement
2
This presentation may contain forward-looking statements within the meaning of the securities laws.Forward-looking statements can be identified by the fact that they do not relate strictly to historical or currentfacts. They often include words or variations of words such as expects, anticipates, intends, plans,
believes, seeks, estimates, projects, forecasts, targets, would, will, should, could, or may or
other similar expressions. Forward-looking statements provide managements current expectations orpredictions of future conditions, events or results. All statements that address operating performance, eventsor developments that we expect or anticipate will occur in the future are forward-looking statements. Theymay include estimates of revenues, income, earnings per share, capital expenditures, dividends, liquidity,capital structure or other financial items, descriptions of managements plans or objectives for future
operations, products or services, or descriptions of assumptions underlying any of the above. All forward-looking statements speak only as of the date they are made and reflect the Companys good faith beliefs,
assumptions and expectations, but they are not guarantees of future performance or events. Furthermore,the Company disclaims any obligation to publicly update or revise any forward-looking statement to reflect
changes in underlying assumptions, factors, or expectations, new information, data or methods, future eventsor other changes, except as required by law. By their nature, forward-looking statements are subject to risksand uncertainties that could cause actual results to differ materially from those suggested by the forward-looking statements. Factors that might cause such differences include, but are not limited to, a variety ofeconomic, competitive and regulatory factors, many of which are beyond the Companys control and which
are described in our Annual Report on Form 10-K for the fiscal year ended April 30, 2012 in the sectionentitled Risk Factors, as well as additional factors we have described and may describe from time to time in
other filings with the Securities and Exchange Commission. You should understand that it is not possible topredict or identify all such factors and, consequently, you should not consider any such list to be a completeset of all potential risks or uncertainties.
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JTH HOLDING, INC.
In-depth look at thecompany
Liberty business model
2013 Outlook
Investor Day 2012 Take Aways
3
JTH HOLDING, INC.
Agenda
The Liberty Story
Operational Overview
Financial Overview
Marketing
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The Liberty Story
John Hewitt
Chairman and Chief Executive Officer
JTH HOLDING, INC.
Death, taxes and change
Recession resistantLibertyopened over 800 offices in the lastrecession
Growing industry
Seasonal
IRS
Fragmented
Industry is Attractive to Entrepreneurs
6
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JTH HOLDING, INC.
129 130 130 130132
134
138
143 142 141143
145 146148
150
Certainties in Life - Death, Taxes and Change!
7
Source: IRS.gov, Publication 6187 Updated 7/12, SOI Tax Stats Historical Table 1, figures are for calendar years
Total Number of Individual Tax Returns
(in millions)
Projection is for additional 2 million tax returns a year over next 4 years
JTH HOLDING, INC.
Early Season - Fastest Access to Refund
younger customer base
lower income
simple returns
Two Tax Seasons
8
Late Season - Lowest Tax
older customer base
higher income
complex returns
Fiscal Year 2012
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JTH HOLDING, INC.
Paid Preparer Market Share
9
H&R Block18%
JacksonHewitt 3%
Liberty 2%
Other76%
Mom and Pops prepare twice as many returns as the
big three national preparers combined
JTH HOLDING, INC.
JTH Holding, Inc. (NASDAQ: TAX) is theparent company of Liberty Tax Service
Fastest-growing national retail preparerof paid tax returns
Gaining market share every year for13 years
Third largest in the United States andsecond largest in Canada
Stable industry with consolidation opportunities
Internal consolidation opportunitiesacquisition of Area Developerterritories
Ranked the 7thbest franchise on Forbes Top 20 Franchises for the Buckin February 2012
Top Ten Fastest Growing Franchisor in the 21stcentury
Clear goal
Culture
Experienced team
Company Overview
10
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JTH HOLDING, INC.
John HewittFounder and CEO
11
43 years of industry
experience
Accounting Today namedHewitt one of the 100 mostinfluential people in accounting12 times
Only person to have foundedtwo separate franchisecompanies ranked in the top25 in the world byEntrepreneurmagazine
Only person to have foundedtwo different companies withover 4,000 locations
By far the longest tenuredCEO of industry players
Joined H&R Block
Opened the 500thJackson Hewitt office
Entrepreneur of the Year for the state ofVirginia by Ernst & Young
Honored by the International FranchiseAssociation as its Entrepreneur of the Year
1969
1992
Resigned from Jackson Hewitt1996
2003
2006
1989 Opened Jackson Hewitt offices in 169Montgomery Ward Department Stores
Founded Liberty Tax Service
2000 Began expanding Liberty Tax in the U.S.
2009
2011
Opened the 3,000th Liberty Tax office
2 million tax returns filed
2012 Opened the 4,000th Liberty Tax office
JTH HOLDING, INC.
Experienced Leadership
12
With
Liberty
In
Industry
John T. Hewitt Founder & CEO 15 43
Mark F.Baumgartner
Vice President & Chief FinancialOfficer
9 9
RufeVanderpool
Chief Operating Officer 8 15
Jim WheatonGeneral Counsel, Vice President ofLegal & Governmental Affairs
2* 14
MarthaOGorman
Chief Marketing Officer 15 25
Charles E.Kirkpatrick
Chief Information Officer 10 10
*Jim Wheaton served as outside counsel for Liberty since 1998.
(in years)
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JTH HOLDING, INC.
Liberty versus H&R Block, Jackson Hewitt and Mom and Pops
Three prong operational approach (Franchisee, Area Developer &Corporate)
No CEO turnover
Culture
Franchise model versus company owned stores
Libertys Competitive Advantages
13
JTH HOLDING, INC.
Cumulative Change in Offices Versus 2007
14
-20.0%
-10.0%
0.0%
10.0%
20.0%
30.0%
40.0%
50.0%
60.0%
70.0%
80.0%
90.0%
2008 2009 2010 2011 2012
Total Franchises H&R Block Jackson Hewitt Liberty Tax
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JTH HOLDING, INC.
2,200 Franchisees average just two locations each
Can add 6,0007,000 more offices in the US
Taking share from Mom and Pops
The Opportunity
15
Operational Overview
Rufe VanderpoolChief Operating Officer
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JTH HOLDING, INC.
Agenda
17
Franchise Model
Sales Model
Training
Technology
JTH HOLDING, INC.
Three Tiered Franchise Model
18
Be in business for yourself but not by yourself
FranchiseeArea
Developer Corporate
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JTH HOLDING, INC.
Licenses a Territory(ies)
Territories defined as apopulation of ~30,000
Look for H&R Block locationsand/or McDonalds
Exclusive marketing rightswithin geographic boundaries
Territory may have multipleoffices
Franchisee
19
JTH HOLDING, INC.
Licenses a collection ofterritories
Usually DMA based
Responsible for recruitment ofnew franchisees
Provide first level operationalsupport
Revenue sharing model
Area Developer
20
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JTH HOLDING, INC.
Operational support to both ADs and Franchisees
Year-round multi-level training
Technical support
Tax support
Financial product support
Corporate
21
JTH HOLDING, INC.
Regional Directors
Corporate Area Developers
Area Developer Support Staff
Site Selection and Mapping
Guerrilla Marketing Department
Tax School
Operational Support
22
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JTH HOLDING, INC.
Other Support
23
Technical Support1 Computer
Installation andSetup
SoftwareInstallation
SystemTroubleshooting
Tax Support2 Tax Assistance Certification
Programs Audit Support
Bank Support3 Service Bank
Enrollment Customer Refund
Settlements
JTH HOLDING, INC.
Agenda
24
Franchise Model
Sales Model
Training
Technology
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JTH HOLDING, INC.
Lead Generation
Conference Call
Discovery DaySeminar
Sign Contracts
Training
Close
Sales Process
25
JTH HOLDING, INC.
Agenda
26
Franchise Model
Sales Model
Training
Technology
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JTH HOLDING, INC.
5 day intensive training on all aspects of runninga tax business
Introduction to all corporate systems and reports
Effective Operations Training (EOT)
27
Day in the office
Guerilla Marketing exposure
JTH HOLDING, INC.
Franchisee Training
28
Effective Operations Training (EOT) ~900
Hands on Training (HOT) ~1,800
Liberty College ~900
Update Training ~1,250
Leadership Call Series ~400
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JTH HOLDING, INC.
Area Developer Training
29
AD Operations ~20
AD Retreat2 a year ~100
Elite AD new
JTH HOLDING, INC.
Excellence Training
30
Top Gun ~180
Elite 18Largest franchisees 18
Fantastic 50Rest of the top 50 50
Elite AD new
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JTH HOLDING, INC.
Tax School
Rapid Class
Tax Preparer Certification System
Intermediate Modules
IRS Certification Program
Continuing Education Credits
Competency Test PTIN
Tax Preparer Training
31
JTH HOLDING, INC.
Agenda
32
Franchise Model
Sales Model
Training
Technology
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JTH HOLDING, INC.
LibTax taxpreparation
software
Bank productsystems
E-filing
systems
Customermanagementand support
System-widedata analysis
and reporting
Officemanagement
systems
Technological Support
33
JTH HOLDING, INC.
NextGen - Single Tax Platform
34
Platform Roll-out: DIYTax Season 2013
OfficesTax Season 2014
Web-based program
Uses private Cloud-
based system
Online to OfficeOfficeto Online Single Customer Database
Single Tax Application & Content (Tax Rules)
TwoInterfaces
DIYOffices
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JTH HOLDING, INC.
Interactive Customer Facing System
Touchscreen interface based upon Windows 8
Referrals
Closing the Sale functionality
Marketing offers available
Entertainment options
Touchscreen Pilot Program
35
Marketing
Martha OGormanChief Marketing Officer
36
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JTH HOLDING, INC.37
Building a brand from scratchOne community at a time!
JTH HOLDING, INC.
Powerful Branding Tool - Wavers
38
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JTH HOLDING, INC.
Wavers
39
JTH HOLDING, INC.
www.libertytax.com
40
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JTH HOLDING, INC.
Mascots and Costumes
41
JTH HOLDING, INC.
Who we are!
Where we are!
What we stand for!
Marketing Philosophy
42
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JTH HOLDING, INC.
Other Mascots
43
JTH HOLDING, INC.
Miss Liberty
44
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JTH HOLDING, INC.
Always Improving
45
JTH HOLDING, INC.
B2B
46
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JTH HOLDING, INC.
Give Little Unexpected Extras
G.L.U.E
47
Child friendly
Free refreshments
Open year round
Extended hoursduring tax season
Community involvement
JTH HOLDING, INC.
Cash-in-a-Flash
48
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JTH HOLDING, INC.
Community Involvement
49
JTH HOLDING, INC.
AdLib
50
Click on Item you want to work with
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JTH HOLDING, INC.
AdLib
51
Click oncustomize
JTH HOLDING, INC.
Constant Contact
52
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JTH HOLDING, INC.
Texting Program
53
JTH HOLDING, INC.
Hispanic Initiative
54
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JTH HOLDING, INC.
Hispanic Initiative
55
JTH HOLDING, INC.
Guerilla Marketing Program
56
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JTH HOLDING, INC.
Guerilla Marketing Program
57
JTH HOLDING, INC.
The secret of success is to do the
common things uncommonly well.
- John D. Rockefeller
58
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Financial Overview
Mark Baumgartner
Chief Financial Officer
JTH HOLDING, INC.
Agenda
60
Revenue
Seasonality of Business
Financial Update
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JTH HOLDING, INC.
Categories of Revenue
61
Franchise FeesRoyalty and Advertising Fees
Financial Products
Interest Income
Tax Preparation Fees
Other
Total Revenue
JTH HOLDING, INC.
Franchise Fees
62
Area Developer
Unit Territory
Buying rights to develop unit territories in the area 126 active AD entities Receive on average 50% of franchise fee and royalties from franchises in their
area
New Franchisee $40,000 franchise fee, 14% royalty, 5% advertising Zero down option, 25% royalty first five years, 5% advertising
Expanding Franchisee $40,000 franchise fee, 14% royalty, 5% advertising Zero down option, 25% royalty first five years, 5% advertising 20% down, pay remainder over next 4 tax seasons, 14% royalty, 5%
advertising Rent to own, try before you buy
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JTH HOLDING, INC.
Royalty and Advertising Fees
63
Traditional Model 14% Royalty5% Advertising
Zero Down Option* 25% Royalty5% Advertising
* Higher royalty rate is only f or 5 years, then reverts to 14%
If territory exists in an AD area, royalty revenue is split
Effective royalty rate should increase over next few years
JTH HOLDING, INC.
Refund Transfer
Product
Loan-based
Product
Financial Products Overview
64
~50% of Libertys US Customers Receive Financial Product
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JTH HOLDING, INC.
Fastest way to get access to a refund is to provide a bank account
number for direct deposit
Some customers do not have a bank account or do not want tohave refund deposited into their account
Product creates a temporary bank account in customers name
Can have preparation fees paid out of refund
Pick up check in office or load it on to a prepaid debit card
Refund Transfer Product
65
JTH HOLDING, INC.
Liberty H&R Block Jackson Hewitt
Set-up Fee $29.95 $34.95 $29.95
Transmitter Fee $20.00 $20.00
Check Fee $20.00
Total $49.95 $54.95 $49.95
Refund Transfer Product Pricing in 2012
66
Only revenue Liberty received was the $20 transmitter fee onproducts outsourced to a third party
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JTH HOLDING, INC.
Libertys 2013 Pricing and Revenue Received
67
Revenue Received by Liberty
Charge toCustomer
Third Party JTH Financial
Set-up Fee $29.95 Split All
Transmitter Fee* $9.00 All All
Total $38.95
Charge to the customer decreases $11.00
Set-up fee is either collected solely by Liberty or split with a third party
Transmitter fee is collected solely by Liberty
*Applicable where allowed
JTH HOLDING, INC.
In 2012 tax season, Republic Bank offered RALs nationally
Republic agreed with bank regulators to exit the business
Liberty created the ICA
The End of RALs
68
States Where Liberty Offered ICAs in 2012
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JTH HOLDING, INC.
Number of ICAs peaks in the early season and then
tapers down
In seven states where program was offered in fiscal2012, average loan amount was $2,033 and totalcharges (fees and interest) averaged approximately4.5 points
Liberty agrees to purchase any loan that becomes 60days past due
ICA Economics
69
JTH HOLDING, INC.
Tax Preparation Fees, Interest Income, and Other
Tax Preparation Fees
Returns prepared in companystores
Online returns through eSmart
Represent offices in transition
Will operate more companystores due to Walmartopportunity
Interest Income
Interest on loans to franchiseesand ADs
Other
Commission fees
Transfer fees
70
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JTH HOLDING, INC.
Agenda
71
Revenue
Seasonality of Business
Financial Update
JTH HOLDING, INC.
Income Statement Seasonality
72
-$10,000
$0
$10,000
$20,000
$30,000
$40,000
$50,000
$60,000
1Q11 2Q11 3Q11 4Q11 1Q12 2Q12 3Q12 4Q12 1Q13 2Q13
Revenue Net Income (Loss)
($ in thousands)
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JTH HOLDING, INC.
Quarterly Operating Cash Flow
73
-$30,000
-$20,000
-$10,000
$0
$10,000
$20,000
$30,000
$40,000
$50,000
$60,000
$70,000
1Q11 2Q11 3Q11 4Q11 1Q12 2Q12 3Q12 4Q12 1Q13 2Q13
($ in thousands)
JTH HOLDING, INC.
Balance Sheet Seasonality
74
($ in thousands)
$0
$20,000
$40,000
$60,000
$80,000
$100,000
$120,000
1Q11 2Q11 3Q11 4Q11 1Q12 2Q12 3Q12 4Q12 1Q13 2Q13
Revolving Credit Facil ity Current Notes Receivable
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JTH HOLDING, INC.
Credit Facility
(in millions)
Term 5 Years
Maturity April 30, 2017
Term Loan Amount $25 Million
Line of Credit Amount $105 Million
Accordion $70 million
Rate Libor + 1.62%1
75
1Applicable margin varies from 1.50% to 2.25% and adjusts throughout the term of the credit facility if triggered by certain increases anddecreases in our leverage ratio
JTH HOLDING, INC.
Agenda
76
Revenue
Seasonality of Business
Financial Update
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JTH HOLDING, INC.
Fiscal Year 2012 Results
2,188,000Total Revenues $109.1M
Total Operating Expenses $79.4M
8.0%
Net Income $17.4M
Diluted EPS $1.23
Adjusted EBITDA[1]Margin 36.3%
Adjusted EBITDA[1] $39.6M
[1]Adjusted EBITDA as net income (loss), plus: provision for income taxes, interest expense, non-recurring (income) expense,depreciation and amortization, foreign currency transaction (gain) loss, and stock-based compensation. Please see slide 84 for areconciliation of Adjusted EBITDA to net income, the most directly comparable financial measure calculated and presented in accordancewith U.S. generally accepted accounting principles, or GAAP.
JTH HOLDING, INC.
Fiscal Year 2013 Second Quarter Results
2,188,000
Total Revenues $7.3M
Total Operating Expenses $17.9M
8.0%Net Loss ($6.7M)
EPS ($0.51)
78
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JTH HOLDING, INC.
Balance Sheet
79
April 30, 2012 October 31, 2012
Cash and cash equivalents $19.8 $1.2
Receivables, net $76.8 $80.6
Debt $29.0 $68.3
Stockholders equity $100.2 $88.8
(in millions)
JTH HOLDING, INC.
Fiscal 2013 Outlook
Revenue
$131
$136 million
Offices Growth of 11-13%
Net Income $20.0 - $21.5 million
Effective Tax Rate 38.6%
80
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JTH HOLDING, INC.
Shares of Common
Stock BeneficiallyOwned
% of Common
Stock BeneficiallyOwned
Datatax Business Services Limited 4,680,000 33.4%
Edison Venture Fund IV, LP 1,443,200 10.3%
Envest Funds 899,605 6.4%
Major Shareholders
81
(as of September 30, 2012)
Q&A
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Appendix
83
Reconciliation of Adjusted EBITDA
Fiscal Year
Ended
April 30, 2012
Reconciliation of Net Income to Adjusted EBITDA
Net income $17,411
Interest expense 1,854
Income tax expense 10,394
Depreciation, amortization and impairment charges 7,169
Foreign currency transaction (gain) (4)
Costs associated with postponed IPO 1,348
Stock-based compensation expense 1,429
Adjusted EBITDA $39,601